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Monday, Oct 18, 2021
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Busting Six Myths About A Falling Rupee

Our crashing currency has brought all sorts of doomsayers out from the woodwork. Financial analyst Deepak Shenoy skewers a few of them.

Busting Six Myths About A Falling Rupee
Busting Six Myths About A Falling Rupee
outlookindia.com
-0001-11-30T00:00:00+05:53

Myth 1

Weaker currency means a weak country

Would you say Kuwait is stronger than America? After all, it’s now 3.52 dollars for one Kuwaiti dinar. Exchange rates don’t indicate weakness of countries. A weak currency can spur exports and cut impo­rts, a mechanism that helped China grow to a giant economy. A higher exchange rate will cause Indians to choose locally made goods because the foreign ones are now more expensive, and make our exports cheaper (and thus more desirable). These are not signs of weakness.

Myth 2

This is the end. We are going back to 1991.

While we are in a crisis, it’s not like 1991. We’re a much bigger economy now and we have more open markets. Currently, foreign investors are exiting; in 1991, we didn’t have any foreign investors. However, how we react to a relatively minor issue of a rupee collapse can set us back to the times before 1991, when we restricted both dollar...

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